Reports indicate that the U.S. airline industry, which was buoyed by rising travel demand at the beginning of the year, is now experiencing a downturn due to President Donald Trump's tariff policy and a trend toward reduced government expenditure.
According to Reuters on the 27th (local time), the outlook for the airline industry has recently worsened, causing major corporations' stock prices to fall. The U.S. S&P 500 airline index has dropped about 15% this year, significantly underperforming the overall S&P 500 index. Delta Air Lines and United Airlines' stock prices each fell by more than 20%, while Frontier Airlines decreased by 2%.
This is interpreted as consumers and corporations tightening their spending in travel, classified as 'discretionary expenditure', due to increased uncertainties in the global economy stemming from the U.S. tariff policy. David Neelman, chief executive officer of Breeze Airways, told Reuters, "For people, the top priorities are meals and housing, with air travel coming next," adding, "If there’s no job, they won’t buy plane tickets."
Recent data shows a decline in travel demand. The U.S. Consumer Confidence Index and Expectations Index for March recorded their lowest levels in four and twelve years, respectively. While sales of airline tickets by U.S. travel agencies increased by 39% in January compared to the previous month, they dropped by 8% in February. The annual growth rate of passenger traffic compiled by the Transportation Security Administration slowed from 5% in January to 0.7% in March. Moreover, credit card expenditures related to airlines fell by 7.2% month-on-month in February, recording its lowest level in six months, according to Reuters.
Recent consecutive aircraft safety incidents are also dampening demand. According to Reuters, the volume of Google searches related to aircraft safety surged by 900% in February, reaching an all-time high.
Corporate travel demand is also slowing down. Typically, reservations have been weak during the January to March period, when corporate travel demand is high. Delta Airlines stated that its corporate booking growth rate, which recorded double-digit increases in January, has recently fallen to single digits. Gabe Rich, president of corporate travel agency Altour, noted, "Demand for corporate travel in diverse sectors such as finance, renewable energy, manufacturing, and technology has decreased by up to 10% compared to the previous year," adding, "Many government agencies and subcontractors are tightening their belts."
As demand decreases, airfare prices are also falling. According to the U.S. Department of Labor, airline fare prices in February fell for the first time in six months compared to the same month last year. Airlines are still maintaining their annual performance forecasts, but there are concerns that they may adjust their outlook if summer peak season demand is weak.
Airlines have begun to cut flights to prevent fare declines and maintain profitability. Major airlines, including Frontier Airlines, Delta Air Lines, United Airlines, American Airlines, JetBlue Airways, and Allegiant Air, have reduced capacity for April to June this month. United CEO Scott Kirby stated, "If demand does not recover by August, there could be a significant reduction in capacity across the industry."